From April 2017, all employers, employees, and self-employed workers in the public sector will be expected to pay the appropriate amount of tax respective of their position within an organisation.
And the proposed changes, announced by HM Revenue & Customs (HMRC) this year, will greatly impact the take-home pay of all off-payroll locums in the NHS.
What is changing?
The Government is cracking down on the use of self-employed people working in an organisation as if they were employed.
HMRC sees this as a deliberate attempt to evade paying the correct amount of tax.
As a result, if they find that the locum is working in the same way as an employee would, the employer will be expected to deduct tax and National Insurance Contributions (NICs) at source.
In effect, the Government will be bumping up IR35 – the tax legislation which governs “disguised employment” – to target the employer, rather than the employee.
It means that the locum may be subject to an individual rate of tax – 40 per cent for a higher rate taxpayer and 45 per cent for an additional rate taxpayer. NICs will also be deducted from a locum’s salary at the rate of 12 per cent.
Evidently, this is a big step up from the basic 20 per cent corporate tax rate a locum will be accustom to.
While not all locums will fall under the IR35 net, and while some areas of the legislation are still unclear, it is important to assess early on how these changes will affect you.
That’s where we can help. We will be following the Chancellor’s Autumn Statement on 23 November closely to ensure that we are fully informed to fully prepare you for the upcoming changes.